March 26, 2013

Host: Ted Simons

Suntech Solar Power Plant Closed

The Suntech Power Holding’s Goodyear solar panel assembly plant has closed. Mike Sunnucks of the Phoenix Business Journal will talk about why the plant has closed and the state of solar power businesses in Arizona.

Ted Simons: Sun-Tech power holding company is closing its solar panel assembly -- Bankruptcy. Here now to talk about the plant's closure and what it means to the solar industry in Arizona is Mike Sunnucks, who's been covering the story for "The Phoenix Business Journal." Good to see you again. Sun-Tech power holdings. Who are we talking about?

Mike Sunnucks: A huge Chinese company, one of the biggest solar panel manufacturers in the world. It was big fanfare in when they opened the Goodyear plant. They were going to hire 150, 300 people to assemble solar panels, shipped in from China. It was kind of a big linchpin of our solar economic development efforts. Jan Brewer was there, it was a big win for the west valley, which tried to get more high-wage jobs, these were manufacturing production types jobs. All that is gone.

Ted Simons: How many jobs have you lost?

Mike Sunnucks: At the end they had 43 people. They had ramped up a little bit but had cut back, but when they announced the layoffs, and the bankruptcy that's happened, they're shuttering the plant and 43 folks are out of work. But it's a big disappointment, for the solar industry and the region.

Ted Simons: The plant closes what, in a couple weeks?

Mike Sunnucks: Yeah. They pretty much shutting it down. They made the panels in China, they shipped them here, and they were assembled here. It was to get around the buy American type contracts so they could sell to some public utilities, public entities, school systems, so a lot of government agencies, state localities have a buy American rule, so if they do some of the work here, car companies do the same thing. Do some of the work here, they were able to get around that.

Ted Simons: Get some U.S. fingerprints on it.

Mike Sunnucks: Absolutely.

Ted Simons: So why is this plant closing?

Mike Sunnucks: There's a couple of things. Some of it is systematic problems with the solar industry. There's too many producers chasing too few consumers. I think there was a report there's 80 some some major solar producers in the world. They're very reliant on subsidies, tax breaks, incentives, you get a tax break or some kind of incentive from utility for getting a solar water heater, they've done this a lot in Europe, Germany, and Spain have done a lot of subsidies. It's very popular industry, both politically and with the media. So you see these programs that encouraging businesses and consumers to go solar, and do these things. As soon as these things end, it seems like the -- The companies falter. Secondly, Sun-Tech has a lot of problems. A ton of debt, a billion dollars in debt, there's questions how they were managed, they're limiting the CEO back in China from being able to leave the country. There's a lot of questions about Sun-Tech itself. So it's not just the solar issue, it's this company had problems, got caught up in a lot of debt.

Ted Simons: Subsidies are one thing and Sun-Tech having bankruptcy problems and all sorts of weirdness going on in China is another, there's also the idea that we've got tariffs on these imports.

Mike Sunnucks: Yeah. In the last year the Obama administration imposed I think 27% tariffs on solar panels coming in from China, arguing they were not competing fairly, that they were subsidizing their own companies over there, and then dumping cheap product over here in the U.S. to the detriment of people like first solar, in Tempe. So those went into effect and that was part of Sun-Tech's demise. And obviously it's been a trade problem with China in other areas, but especially solar. And solar is so competitive and the prices are so low at times when the subsidies aren't there the dumping makes it worse. So Sun-Tech got caught in a bad situation.

Ted Simons: It sounds like in China so much is subsidized over there, that there are these little companies popping up all over the place, and there are far more panels than the need -- Than the demand calls for.

Mike Sunnucks: China subsidizes a lot of its industries, including solar. There's currency issues, the way they treat raw materials like aluminum. And solar panels themselves. So, yeah, you've seen these companies pop up over there, so they have some strange subsidized competition over there. And there's a lot of companies doing well over there, but solar energy just has so many problems, maintaining itself when it's not propped up.

Ted Simons: Let's talk about Arizona. That's going on in China. What's going on in Arizona as far as the industry in general, I know the governor is going to announce a job announcements here next couple days or so in the valley with another solar kind of oriented company. How is the state of the solar industry in Arizona?

Mike Sunnucks: It's mixed. We have this great advantage that we're all about sunshine here, and we have first solar, and the obvious sit with solar is here with us. We're close to California, we're one of the top solar producing states in the country along with California and New Jersey. So we're naturally a hub for that. And there's a lot of projects that have come and gone, some have been successful, some haven't. You've seen school systems put a lot of panels in, Universities have done that. So there's a lot of that, and you've had the utilities promote things with consumers and small businesses. It just long term it seems to have a problem catching hold. It doesn't employ a ton of people, about 10,000, that's nothing to sneeze at, those are good jobs. But it's not a huge sector, say like construction or tourism. So there's some success stories, but there's a lot of challenges because these companies just can't seem to make it work competitively without some kind of tax breaks and subsidies and being propped up.

Ted Simons: What are you seeing in the future? Are we seeing more success stories or more Sun-Techs?

Mike Sunnucks: I think it's going to be like any other industry. You'll see things get weeded down to a few major companies that produce these things, I think if you continue to see smart public policy, smart tax breaks, subkiss for consumers and businesses, people will slowly try to adopt solar like you've seen in some cases. So I don't think it's all doom and gloom that the Sun-Tech thing is a decision appointment for everybody involved here in the region because that was a linchpin and was a good promotion thing for folks we have first solar, Sun-Tech, those are big names that helps you attract more folks. So it's disappointing but long-term I don't think it's as gloomy as people think. But it's got to weed itself out and they've got to get the costs to work in a competitive marketplace.

Ted Simons: Is there any indication of anyone assuming the plant operations out there?

Mike Sunnucks: I haven't heard anything about that. They didn't get a lot of tax breaks. You look at these things where the commerce authority and the city and state are involved, you expect boondoggle, it wasn't really like that. They were in line for job training help, just like any other company, but they didn’t really meet the benchmark-- I hope it doesn't discourage other efforts to get solar here, because it's an industry that can pay pretty well, and it's obviously an energy source for the future.

Ted Simons: That brings up my final question. Is the concern that people will see the solar industry as a PANACEA, everybody will be working in solar in the next five to ten years, or are folks starting to take a more realistic viewpoint of solar as just one of many sectors in Arizona and it's not a be all and end all?

Mike Sunnucks: I think you're right. There was a point when construction was down, and people said, what are we going to do with these construction workers? Let's have them install solar panel and build solar farms. Some of the farms got built, and once they're built there's only a few guys there to run them. Solar panels, you see some work for that. But a lot of consumers can't afford that. When you're buying a hot water heater and you're weighing your pennies, usually do you with cost. It's still cheaper in most cases unless have you a big subsidy to build that. Solar is still a promising sector for us, just because of our climate, our proximity to California, and we still have a lot of companies here that do that. But it depends on what path they take in terms of how to prop it up and how long that is.

Ted Simons: It's an active industry, and with every Sun-Tech that leaves you never know who's going to be coming in. We could get an announcement this week of somebody else moving in.

Mike Sunnucks: The problem is Sun-Tech -- For investors, especially here, they're used to investing in real estate and land. You pitch a solar company to investors, here or silicon valley, things like Sun-Tech kind of diminish their ability to invest in something like that.